LPG and Diesel Prices Increase Next Month

The prices of liquid petroleum gas (LPG) and Diesel will increase by an average of 11.92 percent and 6.6 percent respectively from next month.

In the state council meeting held on June 22, the government passed bills to revise the laws concerning the road traffic tax, special consumption tax, local tax, and oil business in order to increase the oil tax. The Ministry of Finance and Economy stated that starting from July 1, all oil prices will be raised except for gasoline.

According to the revised bill, the special consumption tax on LPG for vehicles will be raised from 173 won to 223 won per liter, and both education tax and tax on imported goods will be raised from 44 won to 59 won per liter.

Hence, the consumer price will increase by about 72 won from 604 won to 676 won (11.92 percent), although some differences might exist among various gas stations.

On the Diesel, the road traffic tax will be increased from 225 won to 287 won per liter, and education tax and travel tax from 84 won to 105 won per liter. Thus, average consumer price will increase about 58 won from 878 won to 936 won per liter (6.6 percent).

Kerosene and crude petroleum oil prices will also increase by 29 won and two won per liter respectively due to the upward regulation of the special consumption tax.

Gasoline price will remain the same because although the travel tax will be increased from 18 percent to 21.5 percent, the traffic tax will decrease from 559 won to 545 won per liter.

Lee Jong-kyu, the section chief of tax system in the Ministry of Finance and Economy, explained, “The adjustment of the tax rate is due to the reformation of the energy tax system, concerning the upward adjustment of tax on Diesel and LPG in order to level them out with the tax on gasoline.”

The price ratio of gasoline to Diesel to LPG will adjusted from 100:64:44 to 100:68:49 due to the tax rate reformation, which will be applied from June 30 next year. Also, after July 2006, the ratio will be raised to 100:75:60.

Jin-Hup Song Chi-Young Shin jinhup@donga.com higgledy@donga.com